A question of scale
It is estimated that more than 70 per cent of the mergers and acquisitions fail, and nine out of 10 start-ups fail to scale. These startling statistics paint a rather alarming picture of the organizations’ ability to scale. While these data points are not new, companies have still not found the answer to grow in a stable manner. One would assume that this is because of fragile economic conditions prevalent in the country. However, to the contrary, the economic climate in the country is conducive for business as India is poised to grow to 7.8 per cent this financial year. Along with this, the Prime Minister’s flagship programs such as Make in India, Digital India and Skill India are also gaining momentum and are observed to be prominently involving the corporate sector to provide an impetus to overall economic growth. The overall improved business environment is also prompting companies to go to the market. In 2015 alone, 10 firms mobilized about Rs 4,600 crore through IPOs in comparison to 2014 (which saw the debut of only six IPOs worth Rs 1,261 crore), which is a healthy sign.
In addition, the market for mergers & acquisitions is ripe. A recent survey by the Economic Times of the top 30 CEOs in India notes that 76 per cent are implementing expansion plans of significant scale and size. According to global advisory firm Mergermarket, the first half of 2015 saw M&A deals worth Rs.1.23 lakh crore ($19.2 billion), which has increased by 11.4 per cent since the last year. Investors focused on Indian start-ups have closed 380 deals between January and June 2015, compared to 304 deals last year.
However, why does the data show that the percentage of M&As and starts-ups are failing? What is preventing organizations from scaling up their operations? Although the economic condition suggests that companies are not shying away from growing either organically or inorganically, the one critical element that organizations overlook is the ‘people’ aspect of scaling, as for most of the investments priorities and concerns center on capital, funds and monetary appropriation.
However, when organizations are engaged in scaling-up, the focus should be ideally on key components like innovation, capital and the right team, in the priority list. A scalable recruitment strategy should not only concentrate on the present, but on future organizational needs. Through our interactions with eminent industry leaders, we have found that the organizations need to channel their focus on aspects like building the right culture and integrating it with organizational values, continuous learning and training, building the right team, along with aspects like agility and autonomy while strategizing processes to scale. Through our cover story, we want to provide you with a multi-dimensional perspective on successful scaling of organizations. Read on the expert views by thought leaders to find out on how to beat the odds.